For starters, the term "gift tax" and the reference to "gift tax return" are misnomers. You will *NOT* pay taxes on a gift valued at less than $11.2m (million) dollars.
Now, with some exceptions an inheritance is not taxable or reportable on any tax return. Not ever. But like I said, their are some exceptions. So it depends on "exactly" what it is you are inheriting. For example, if cash, then it doesn't have to be reported on any tax return ever. But if you are inheriting a 401(k) or traditional IRA, then taxes "will" be paid on that money by you. When you pay those taxes depends on "how" you inherit the retirement account.
Now, gifts given by any one individual, to any one individual that exceeds $15K requires that you file IRS Form 709 - Gift Tax Return with the IRS. But understand that *YOU* *WILL* *NOT* pay any taxes. I don't care if you're giving the kids a million dollars. you will *NOT* Pay taxes. Here's why you have to report it.
When *you* die, your heirs can receive a maximum of $5.2M each and not have to report jack squat to the IRS. But any amount over that and they will pay an inheritance tax.
So, when you give your child $100,000, you file the 709 with the IRS and that $100K is subtracted from your $5.2M maximum that you can pass to your heir tax free. So when you *do* die, your heir can inherit a maxmimum of $5,100,000 since they already have $100K that you gifted to them prior to your death.
Now in your case, you can split the gift between you and your wife, with your wife giving $50K to one child and you giving the other $50K to that same child. That means you will each file your own individual form 709 with the IRS.
Note that TurboTax does not include form 709 and the program does NOT deal with it, since it does NOT affect your taxes. You can get the IRS Form 709 at https://www.irs.gov/pub/irs-pdf/f709.pdf then fill it out and send it to the IRS. DO NOT include this form with your tax return if you mail your tax return. The 709 is sent to a physically separate address from your tax return. That address is in the instructions included with the form you download.
1. I understand that the federal limit for untaxed gifts is $15,000 per year. Can I give each kid $15,000 and my wife give each kid $15,000 per year and avoid taxes for us and the kids?
Yes. But you can also each give $50K and you will still not pay taxes.
2. If the answer to this is yes, can I provide the kids each a single check from our joint account for $30,000, or must I sign a check for $15,000 and my wife sign a check for $15,000?
I would highly recommend two separate checks that you each sign separately. That way, if questioned in the future, the proof is in the pudding.
3. Do I have a reporting requirement to IRS?
Yes, if either one of you give a gift of more than $15K in any one tax year.
4. Do the kids have a reporting requirement to IRS?
No. The recipient of a gift never has a reporting requirement, regardless of the amount. You could give your kids 50 trillion dollars and they don't report jack squat. You do with IRS Form 709.
5. Are there state tax rules of concern? I live in Alaska, my daughter lives in North Carolina, my son temporarily lives in Japan, but Washington is his state of record.
Never heard of such a thing at the state level when it comes to gifts. Some states do assess taxes on inherited value, but I've never heard of a state doing so on anything gifted while the giver was still alive.
